4 years and no budget.. Ovomit will still blame Bush.. but guess what.. this is the Ovomit ECONOMY 16.4 trillion and counting.. To bad not enough were educated to put in people who would cut spending We now officially owe more than we can produce

iamnothere 2012/12/23 17:04:40

Anti-tax conservatives say no to tax-increase deal

BOSTON (AP) — In the city where a protest over tax policy sparked a revolution, modern day tea party activists are cheering the recent Republican revolt in Washington that embarrassed House Speaker John Boehner and pushed the country closer to a "fiscal cliff" that forces tax increases and massive spending cuts on virtually every American.

"I want conservatives to stay strong," says Christine Morabito, president of the Greater Boston Tea Party. "Sometimes things have to get a lot worse before they get better."

Anti-tax conservatives from every corner of the nation echo her sentiment.

In more than a dozen interviews with The Associated Press, activists said they would rather fall off the cliff than agree to a compromise that includes tax increases for any Americans, no matter how high their income. They dismiss economists' warnings that the automatic tax increases and deep spending cuts set to take effect Jan. 1 could trigger a fresh recession, and they overlook the fact that most people would see their taxes increase if President Barack Obama and Boehner, R-Ohio, fail to reach a year-end agreement.

The strong opposition among tea party activists and Republican leaders from New Hampshire to Wyoming and South Carolina highlights divisions within the GOP as well as the challenge that Obama and Boehner face in trying to get a deal done.

On Capitol Hill, some Republicans worry about the practical and political implications should the GOP block a compromise designed to avoid tax increases for most Americans and cut the nation's deficit.

"It weakens the entire Republican Party, the Republican majority," Rep. Steven LaTourette, R-Ohio, said Thursday night shortly after rank-and-file Republicans rejected Boehner's "Plan B" — a measure that would have prevented tax increases on all Americans but million-dollar earners.

"I mean it's the continuing dumbing down of the Republican Party and we are going to be seen more and more as a bunch of extremists that can't even get a majority of our own people to support policies that we're putting forward," LaTourette said. "If you're not a governing majority, you're not going to be a majority very long."

It's a concern that does not seem to resonate with conservatives such as tea party activist Frank Smith of Cheyenne, Wyo. He cheered Boehner's failure as a victory for anti-tax conservatives and a setback for Obama, just six weeks after the president won re-election on a promise to cut the deficit in part by raising taxes on incomes exceeding $250,000.

Smith said his "hat's off" to those Republicans in Congress who rejected their own leader's plan.

"Let's go over the cliff and see what's on the other side," the blacksmith said. "On the other side" are tax increases for most Americans, not just the top earners, though that point seemed lost on Smith, who added: "We have a day of reckoning coming, whether it's next week or next year. Sooner or later the chickens are coming home to roost. Let's let them roost next week."

It's not just tea party activists who want Republicans in Washington to stand firm.

In conservative states such as South Carolina and Louisiana, party leaders are encouraging members of their congressional delegations to oppose any deal that includes tax increases. Elected officials from those states have little political incentive to cooperate with the Democratic president, given that most of their constituents voted for Obama's Republican opponent, Mitt Romney.

"If it takes us going off a cliff to convince people we're in a mess, then so be it," South Carolina GOP Chairman Chad Connelly said. "We have a president who is a whiner. He has done nothing but blame President Bush. It's time to make President Obama own this economy."

In Louisiana, state GOP Chairman Roger Villere said that "people are frustrated with Speaker Boehner. They hear people run as conservatives, run against tax hikes. They want them to keep their word."

Jack Kimball, a former New Hampshire GOP chairman, said he was "elated" that conservatives thwarted Boehner. He called the looming deadline a political creation. "The Republicans really need to stand on their principles. They have to hold firm."

Conservative opposition to compromise with Obama does not reflect the view of most Americans, according to recent public opinion polls.

A CBS News survey conducted this month found that 81 percent of adults wanted Republicans in Congress to compromise in the current budget negotiations to get a deal done rather than "stick to their positions even if it means not coming to an agreement." The vast majority of Republicans and independent voters agreed.

Overall, 47 percent in the poll said they blamed Republicans in Congress more than Obama and Democrats for recent "difficulties in reaching agreements and passing legislation in Congress." About one-quarter placed more blame on the Democrats and 21 percent said both were responsible.

Although negotiations broke down last week, Obama still hopes to broker a larger debt-reduction deal that includes tax increases on high earners and Republican-favored cuts to entitlement programs such as Medicare and Social Security. If a compromise continues to prove elusive, lawmakers could pass a temporary extension that delays the cliff's most onerous provisions and gives Congress more time to work out a longer-term solution.

That's becoming the favored path by some Republicans leery of going over the cliff.

Mississippi Republican Chairman Joe Nosef shares his Southern colleagues' disdain for tax increases. But he stopped short of taking an absolute position.

"I really, really feel like the only way that Republicans can mess up badly is if they come away with nothing on spending or something that's the same old thing where they hope a Congress in 10 years will have the intestinal fortitude to do it," he said.

Matt Kibbe, president of the national organization and tea party ally, FreedomWorks, says that going over the cliff would be "a fiscal disaster." He says "the only rational thing to do" is approve a temporary extension that prevents widespread tax increases.

But his message doesn't seem to resonate with conservative activists in the states.

"If we have to endure the pain of the cliff then so be it," said Mark Anders, a Republican committeeman for Washington state's Lewis County. "While it may spell the end of the Republican Party ... at least we will force the government to cut and cut deep into actual spending."

Back where the Boston Tea Party protest took place in 1773, Morabito wonders whether Boehner will survive the internal political upheaval and says Republicans need to unite against Obama.

"It looked like from the very beginning they were just going to cave to what President Obama wanted," she said of the GOP. "I didn't want that to happen. Now I'm hopeful that they're standing up for taxpaying Americans."


The U.S. banking system is one of the largest, most complex, controversial and misunderstood business structures in the world. In this article, we will look at four specific features of the U.S. banking system that have caused much of the skepticism and confusion surrounding U.S. banks. With this information, we can then determine if economic production should be used as a proxy to link the complex interrelationships that exist between the policies of the Federal Reserve, the money supply system, the national debt level and corporate income taxes.

The Federal Reserve System and Money Supply
The Federal Reserve was created by Congress in 1913 in order to administer monetary policy. Since its creation, many people have questioned the constitutionality of the Fed. In addition, the Fed's use of a fiat currency system, the elusive manner in which the Fed creates money out of "thin air," the Fed's use of a fractional reserve banking system and the Fed's reliance on the economic concept known as the velocity of money, have helped promulgate much of the controversy surrounding the manner in which the Fed operates. Here is an overview of four of the issues that need to be better understood about the Fed.

Fiat Currency
The Federal Reserve utilizes a medium of exchange known as a fiat currency system. President Nixon established this system in 1971 when he took the U.S. monetary system off the gold standard. To this day, many people are upset with this policy and stridently believe that the U.S. currency should be tied to some form of commodity. This, in turn, has caused an ongoing controversy that the Fed has had to deal with for more than 40 years.

Money Creation
The Federal Reserve effectively creates money by implementing policy through its Open Market Committee's operations. To create money, the Fed simply buys government securities such as Treasury Bills, Treasury Notes and Treasury Bonds from participating banking institutions. The Fed does not buy Treasury securities directly from the Treasury Department. Instead, the Fed buys Treasury securities in the "open market," in order to operate in compliance with the Federal Reserve Act of 1913.

The money that the Fed uses to buy Treasury securities has not existed before, but it does have value, because the Treasury securities that the Fed receives and holds in trust, as collateral for the new money it has created and put into circulation, has value. Ironically, when the Fed buys Treasury securities, it does not have to print money to buy them. Instead, the Fed issues a credit to the banking institutions and records the transactions by placing the value of the Treasury securities on its balance sheet. The banking institutions treat the credit just like money, even though no actual cash has been printed.

This process is guaranteed by the full faith and credit of the U.S. government. This, in turn, means that the entire U.S. banking system is dependent upon the ability and willingness of U.S. taxpayers to honor the financial obligations that are implemented by the Fed.

Fractional Reserve Banking System
The Federal Reserve also increases the money supply level via the use of a fractional reserve banking system. This system facilitates the expansion of the money supply through a process known as the multiplier effect. The multiplier effect is implemented through the establishment of a reserve requirement that has been set forth by the Fed for each of its banking member institutions. Since, 2006, the reserve requirement has been set at a rate of 10% for transactional deposits.

Given this level of collateral requirement, the Federal Reserve has put in place a mechanism where the money supply level could be theoretically increased by a factor of up to 10 times the amount of assets held on the Fed's banking member institutions' balance sheets. Of course, this depends on how the banking institutions decide to lend the money and what the borrowers do with the money that they receive. History has shown that a significant amount of money will be held out of circulation by consumers. Therefore, the actual increase in the money supply level will likely never approach the maximum level that could be created by the use of the fractional reserve banking process.

With that said, the multiplier effect is a crucial part of the U.S. banking system, because it allows the monetary system to operate with a money supply level that is far smaller than the amount of money needed to foster the economic production that takes place in the U.S. economy.

Velocity of Money
The Federal Reserve also relies on an economic concept known as the velocity of money in order to help ensure that the U.S. banking system has enough money in circulation to foster all of the transactions associated with U.S. economic production. The velocity of money represents the frequency in which a single unit of currency turns over within the economy in a given year.

For example, if a dollar is used to allow a farmer to buy corn seed, who then grows and sells the harvested corn to a company that makes cereal, which in turn sells the cereal product to a grocery store to be sold to a consumer, a single dollar could theoretically be used to facilitate four dollars of economic activity in a given year. This means that the number of dollars that are required to be in circulation would only need to be one-fourth of the economic production that takes place in the economy.

In actuality, empirical evidence shows that the velocity of money, as defined by the M2 money supply, is less than a factor of two. This means that a dollar is typically turned over less than two times per year in the U.S. economy. Nevertheless, the Fed relies upon the velocity of money in order to meet a portion of the demand for money that is needed to be in circulation in order to foster all of the economic production that takes place in the U.S. economy.

With these issues in mind, let us now look at a host of changes that could be made to the current U.S. banking system in order to simplify its structure and resolve the issues surrounding its existing operations. Ironically, this new approach will rely heavily upon keeping the national debt level in concert with U.S. economic production.

An Approach to Linking the Fed, Money, Debt and Taxes with Economic Production
As most people are aware, in September of 2012, the national debt level in the United States surpassed $16 trillion dollars. This amount seems very high when it is analyzed on a per-household income basis; therefore, it appears that the U.S. is quickly approaching financial calamity. However, when one takes into account that current U.S. economic production is also approximately $16 trillion dollars, one can see that there are important factors to consider when assessing the appropriate level for the country's national debt.

Let us assume that both the U.S. Congress and the Federal Reserve wanted to establish a robust U.S. banking system that was free of any of the current issues and skepticism surrounding its current operations. The Fed could theoretically accomplish this goal by taking a multi-step approach. First, the Fed could endorse a policy that would directly tie the money supply level with the level of economic production. This policy would also require the national debt level to be tied to the level of economic production, because the Fed would need to increase the money supply in circulation to a tune of $16 trillion dollars. This, in turn, would require the Fed to purchase $16 trillion dollars of U.S Treasury securities. By tying the money supply level and the national debt level directly to the level of economic production, the use of a fiat currency system would have a clear and logical basis, and therefore the use of a fiat currency in the U.S. banking system would be completely legitimized.

Once the Fed tied the money supply level and national debt level with economic production, the Fed could then eliminate the reliance on the use of a fractional reserve banking system and disregard the theoretical concept of the velocity of money, in order to remove the operational policies that are responsible for raising so much of the skepticism surrounding the current operations of the U.S. banking system. With that said, this type of policy change would also mean that the Fed would need to raise the total assets on its balance sheet from approximately $3 trillion dollars to $16 trillion dollars. This, in turn, would validate the actions of the Fed and the size of its balance sheet, and the U.S. banking system would have a clearer and more robust structure.

Implications of Linking the Fed, Money, Debt and Taxes with Economic Production
The implications of linking the money supply level with economic production would have a profound impact on the U.S. banking system and the perception of the national debt level. First, the Fed would have much more power due to the fact that the amount of assets under its purview would increase substantially. While this may be a cause for concern with those people who question the legality of the Fed's existence, this provision would in fact remove the arbitrary and capricious nature in which the Fed is perceived to rely upon in order to carry out current U.S. banking operations and, instead, replace it with a clear and logical approach that everyone understands.

Second, a banking system that matched the money supply level, economic production and the national debt level would require a provision that would only allow Treasury securities to be purchased by the Fed. Third, Treasury securities would need to be issued as zero coupon bonds, where the discount rate on the bonds matched the expected long-term growth rate of economic production. Fourth, the ongoing issues surrounding the appropriate national debt level would become a moot conversation, as the national debt level would be deemed appropriate, if it matched the level of annual economic production. Fifth, a national debt level that exceeded total economic production would be the new policy issue that would require justification by policymakers. Sixth, the national debt level would need to increase each year in a manner that would accommodate the growth in U.S. economic production from the prior year.

The Importance of Corporate Income Tax Policy
The corporate income tax system has a key role to play in a U.S. banking system where the Fed's balance sheet, the money supply level, the national debt level and annual economic production were maintained at similar levels. In order to help explain the importance of corporate income tax policy under this type of new banking structure, keep in mind that in a modern economy technological advances and process efficiencies develop as a result of innovation and invention. Since we know that these types of technological improvements increase production far beyond the level that is capable of being generated by human labor alone, a concentration of economic productivity will naturally accumulate to a smaller number of market participants that are utilizing these new types of technological efficiencies.

This means that personal income tax revenue will become less important in the future, as a greater percentage of economic production will be attributed to technological efficiencies at the corporate level. As a result, there would clearly be a need for corporate income tax policy that is correlated with economic production, in order to ensure that enough tax revenue is being generated to meet the money supply level of a growing economy. With this in mind, a balanced budget amendment would then need to be implemented by U.S. policy makers in order to keep the Fed's balance sheet, the national debt level, the money supply level and total economic production at relatively comparable levels. This, in turn, would help solidify a well-designed U.S. banking system and the actions of the Federal Reserve.

The Bottom Line
In a mature economy, where a country's national debt level is approximately the same size as its economic production, a valid argument can be made that the amount of assets on the Fed's balance sheet, the money supply level, the national debt level and economic production should be maintained in equilibrium, in order to maintain a logical and robust banking system. Accordingly, this type of banking system would require major changes in how the Federal Reserve currently operates and would place a much higher importance on corporate income tax policy.

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  • perch38 2012/12/31 19:04:18
    This is in know way a democratic budget, it will take 50+ years to undo what George w did

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  • perch38 2012/12/31 19:04:18
    This is in know way a democratic budget, it will take 50+ years to undo what George w did
  • iamnothere perch38 2012/12/31 20:53:26
    yes gwb only increased the revenue to the government by 85%
  • bettyboop 2012/12/24 15:16:52
  • iamnothere bettyboop 2012/12/24 19:20:55
    and free healthcare while killing that for the rest of us
  • Denai, The Li't Sasquatch 2012/12/24 03:05:20
    Denai, The Li't Sasquatch
    Good grief. This craziness should of been dealt with when the Super Committee was in session. They have had plenty of time to come up with a plan. Obama needs to own up to the simple fact that he stirs up the pot and Congress keeps on blaming one side or another in their floor speeches. Enough is enough of this nonsense.
  • PoliticallyIncorrect 2012/12/23 22:03:32
    When you have an immature, self-serving POTUS, you can bet there won't be a mature economy.
  • Kidasha 2012/12/23 21:11:36
    That was a very long post.
  • iamnothere Kidasha 2012/12/24 02:17:56
    sometimes I feel that there is a need to bring things together to drive home the points
  • wtw 2012/12/23 20:09:03
    The lying propaganda media refuses to focus on the real problem while Obama ns the dems push for taxing the rich as if a new era pf prosperity will enuse and the sun will come out as soon as they paas higher taxes on the "rich".
  • CUDDLY BUT STILL CRABBY 2012/12/23 19:08:38
    Yep. Obumbler and his progressive slime OWN every bad thing coming our way.
  • Jesse-Tired of Liberal Lunacy 2012/12/23 17:56:50
    Jesse-Tired of Liberal Lunacy
    Like I said once before. When Barack Odumbo is 90 years old and slips in the bathroom he's going to say "that rotten George W got water on my floor."
  • iamnothere Jesse-T... 2012/12/23 18:34:40
  • bman~AV... Jesse-T... 2012/12/23 18:45:47
    LOL! You're more than likely right too miss Jesse! Hahahaha!
  • Straud1976 2012/12/23 17:52:57
    The Tea Party continue to try to destroy America. I hope they all get kicked out.
  • iamnothere Straud1976 2012/12/23 18:35:16
    so you believe if you spend more than you make you wont go bankrupt .. interesting
  • bman~AV... Straud1976 2012/12/23 18:47:20
    Yeah, well we hope the same thing will happen to the liberal left in this country too. Starting with Oblunder and working down the list.
  • Politic... Straud1976 2012/12/23 22:02:01
    And take the secular progressives with them. I'd say both ends of the spectrum are just as bad.
  • juneath... Straud1976 2012/12/26 02:00:04
  • Straud1976 juneath... 2012/12/26 02:28:26
    You trailer trash remarks are noted.
  • juneath... Straud1976 2012/12/26 02:30:30
  • John Hall 2012/12/23 17:39:48
    John Hall
    And still today the left on SH keep blaming Bush , GOP and the Tea Party . Are these people afraid to look at how bad Obama and the Senate is are the worried if they speak out they will be called racist . Well I'm not Obama sucks as a president and I hope his vacation sucks as well .
  • iamnothere John Hall 2012/12/23 18:36:48
    straud is a prime example isnt he
  • bman~AV... iamnothere 2012/12/23 18:49:01
    For sure.
  • bman~AV... John Hall 2012/12/23 18:48:49
    I second that John. Maybe Obie will get eaten by a shark or something. Course that poor ole shark will be plenty miserable.
  • iamnothere bman~AV... 2012/12/23 18:50:18
    serious case of indigestion just as he has done to those who have paid attention
  • bman~AV... iamnothere 2012/12/23 18:51:44
    You bet.
  • Striker 2012/12/23 17:39:43
    I usually cannot endure long articles here on SH, but I did get through this one.

    This is so useful to the explanation of the Keynesian fallacy. Let's watch for Lew Rockwell and the school of Austrian economics to rip this thing to shreds, word by word. Even then, few will pay attention, such that they will have no grasp of why the lies of fiat money and fiat debe will take this entire planet into the economic abyss.

    Play around, get hurt, and wonder why.
  • mrdog 2012/12/23 17:26:38
    But I thought O promised in 08 to cut debt in half...what happen? bark
  • mk, Smartass Oracle 2012/12/23 17:15:29
  • bman~AVA~BTTB 2012/12/23 17:10:36
    4 years with no budget. How much you want to bet that we won't have a budget for this year either?? My prediction is this. Provided Oblamer can survive another term then I see us hitting 22 trillion dollars(or more) by the end of his term and no budget for the entire term. He is succeeding in destroying our country with his excessive spending.
  • iamnothere bman~AV... 2012/12/23 18:38:17
    the debtocraps in the house and senate are right there with him
  • bman~AV... iamnothere 2012/12/23 18:44:28
    You bet they are. We don't have any strong willed folks to stop the regime.
  • maggie bman~AV... 2012/12/30 01:22:06
    what is wrong with the people who voted this man back in? Some folks I know said he could not get every thing done in 4 yrs he needed 4 more to finish the work he was trying to do
  • bman~AV... maggie 2012/12/30 04:03:57
    I hear you there miss Maggie. The first 4 years wasn't enough to completely cripple this country. To do that he will need the additional 4 to make it happen. I just don't know what people were thinking when they voted him back in. It just boggles the mind.
  • iamnothere maggie 2012/12/30 19:30:26
    yes totally destroy seems to be his goal

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